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Monday 13 October 2008

Interview: Vince Cable

The Liberal Democrats’ sound money man

Simon Nixon talks to Vince Cable, the Lib Dem Treasury spokesman and acting leader, who the City admires as one of the few politicians to talk sense about Northern Rock

Since then, Cable’s stock has soared in Westminster and the City. As acting leader of the Lib Dems since the resignation of Sir Menzies Campbell, he has perhaps been lucky that the big political issues have all been in the economic sphere. Throughout the Northern Rock crisis, he has been one of the few MPs who has appeared fully to understand what’s at stake — in terms both of moral hazard and of cost to the taxpayer. His performances at PMQs have been so telling that he is heard in near-silence — a rare honour for a Lib Dem leader. Much more of this, I suggest to him, and a party once ridiculed for its wacky economic policies will start to be seen as the party of sound money — a virtue traditionally associated with stern, unbending Tories.

Cable insists he’s always been a sound-money man and that the caricature of his party is unfair. ‘I’ve just been reading some of Jo Grimond’s early speeches and I was struck by how he was ahead of his time. He was calling for education vouchers and health insurance and standing up for open markets and free trade back in the Sixties, when the paternalistic Tories were more concerned with protecting GB plc and Harold Wilson was nationalising everything. Our message got lost a bit over the last decade, when we were calling for higher taxes and more spending....But we do now have a very economically literate team running the party.’

Cable was chief economist at Shell before becoming an MP (for Twickenham) at the third attempt in 1997. Other members of the team include both leadership candidates: Chris Huhne is a former City editor of the Independent and a founder of the ratings agency Fitch; Nick Clegg gained experience of economic policy-making as an EU trade negotiator working for Leon Brittan. Meanwhile David Laws, the party’s education spokesman, was a high-flyer at BZW, the investment-banking arm of Barclays.

Contrast that real-world experience with the Labour front bench. Cable believes the reason the government found itself in such a mess over Northern Rock was sheer financial naivety. ‘It has allowed itself to be led by the nose. The Treasury was right to offer a guarantee to depositors because without one there might have been a systemic failure. But it was wrong to claim it had no option but to bail out the bank. It should never have advanced money unconditionally. At the least, Darling should have got rid of the management. Instead, he gave the impression he was advancing money in order to save the bank as an institution. Now the shareholders have him over a barrel.’

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